Thinking about retiring? Use this checklist to see if you’re really ready

Are you thinking about retiring soon? Here’s a checklist to help you decide if you’re ready.

Thinking about retiring? Use this checklist to find out if you’re really ready

As we reported earlier this week, many people are putting off retirement, for fear that they’ll not have enough money to support them through their later years. So, how do you know when you’re ready to retire? Well, if you’re even considering retirement, here are some of the points you should probably have covered before you take the big leap.

1. Make sure you have the money
It wasn’t so long ago that a few hundred thousand may have covered you for a decent retirement. Nowadays, Industry Super Australia thinks that a couple should have at least $775,000 to retire comfortably. At any rate, the ASFA standard suggests that you should expect to spend around $24,000 a year for a ‘modest’ lifestyle, or $43,000 for a ‘comfortable’ lifestyle.

These figures are averages that assume you own your own home. The only way you can discover whether you have enough money on which to retire is to do the maths. First, track your spending. This includes noting down all expenses, including rent, utilities, food, fuel and entertainment. No expense should be overlooked.

Then set a budget and live off it for a month. After the first month, try cutting back on your expenses by 10 per cent. Then do this for another one month. There’s a general rule that you’ll need about 80 per cent of your pre-retirement income to live in retirement, so, if you can live off 70 per cent, you’ll have a better shot at saving and covering yourself for emergencies.

2. Educate yourself
One cardinal rule that is broken by many retirees is knowing about their finances and how they work. This doesn’t just mean knowing how much you can save and spend. It’s knowing about how to use tax breaks, concessions and investments to your advantage, so that you can save and earn on a limited income.

If you’re a YourLifeChoices’ subscriber, you’re on the right track. It also pays to read finance blogs or the money section of a newspaper. Keep an eye out for free, financial literacy courses, either online, at adult education facilities or your bank or other financial institution. You don’t need a degree in finance, but it will help you to make better decisions that could potentially save you a lot of money.

3. Learn all you can about super
Let’s face it: the superannuation system can be insanely confusing. Again, if you’re a YourLifeChoices subscriber, you’ll probably have a better idea than most about how the system works. But changes to super rules, confusion about how super is taxed, knowing the opportunities available to you to help you maximise your super, and just how long your super will last can still be difficult to track.

First things first: learn the terminology, then track down any missing super, consolidate your accounts – both bank and super – and check your insurance cover to see that you’re not paying money for unnecessary fees.

And, if you become savvy enough with super, you may even be able to manage your own super fund, saving you a lot of money over the years.

4. Be as debt-free as possible
Many baby boomers will enter retirement with some form of debt. Ideally, when making the decision to retire, you’ll do so with as little debt as possible. At the very least, it’s probably best to have paid off your mortgage, because retirees who don’t own their own home will have a tough time of it in retirement.

5. Reduce your dependants’ dependency on you
Ideally you’ll have no dependants, but if you do, ensure that they’re in a good financial position so that your money can stay in your pocket. Discuss their situation with your partner or, at the very least, ensure you factor in any expenses that may arise from them, such as helping them with a home deposit, or paying for your grandchildren’s education. Figure out how far you’re willing to support them and ensure that you have the money to do so.

6. Ensure that you have affordable insurance
Make sure that you have decent affordable insurance. This includes, health, car, home and contents insurance. Allow for a 10 per cent increase in costs each year.

7. Account for worst-case scenarios
It’s a long shot, but what if your home is swept away by floods or a freak hailstorm punches baseball-sized holes in the roof of your car? If your insurance doesn’t cover such events, you could be in trouble. Make sure your house is in good condition too. Home maintenance is often a cost not accounted for by many retirees. Try to have a rainy-day fund or emergency fund set aside for any of these scenarios. You’ll thank yourself for it later.

8. Have another source of income
Sounds easy, right? If you have a second home, you can rely on rent payments to provide you with extra retirement income. You could invest in a small business, or become an online seller. Are you handy on the tools? Or a better-than-average seamstress, artist, or crafty type? Do you have a green thumb? These are all skills that could bring you extra income in retirement. If you learn the rules and play the system, you can earn a little extra and make your retirement more comfortable.

Do you have any advice for anyone thinking about retiring soon?

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    COMMENTS

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    26th Jan 2017
    3:31pm
    With the way the government changes legislation and creates penalties for planning, working, and saving towards one's retirement the only worthwhile suggestion (maybe) on the above checklist is no. 4. The rest can be donated to the "poo bank".
    In Outer Orbit
    28th Jan 2017
    2:11am
    I totally agree with No1 - make sure that you have the money - all the other points above appear related 'means to the end', albeit optional rather than ends in themselves.

    Thankfully there is a lot more to retirement than affordability, meaning any early retirement decision may be foolhardy if a financial calculation alone. Having a clear idea what to do next is just as important. Nobody wants an affordable place on the scrap heap.

    As checklists go, this one looks worthy of The Donald - ie it seems to overlook a lot of important stuff. How about doing a follow up checklist covering all the non-financial considerations? Alternatively we could all just retire and build walls - Mexico will pay us.
    Maggie
    10th Aug 2017
    10:32am
    So far, so good . . .but In Outer Orbit is right. Look to the day when you have to give up driving: how far are you from amenities, and no, you may not always be able to walk everywhere either. Is there public transport, and when you cannot manage that how far are you from the people who love and will help you?

    How about looking about for things that will absorb you, when you no longer have to get up and go to work, like hobbies and possibly U3A, a great institution. For those of you who have not yet met U3A, it's the University of the Third Age. There are branches everywhere and they are open to all over the age of 55. No academic qualifications needed (nor are they gained in this country) and there are heaps of wonderful courses:Art, Photography, Philosophy, Crafts Current Affairs etc. You will meet a bunch of lovely people there too.

    Volunteering is another possibility and you don't have to be very mobile to help children learn to read etc. You do need to get occupied though and even if you love reading and gardening and listening to music at home, outside social contact is essential.


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